SMSF trustees must exercise a degree of caution when signing a trust deed electronically to avoid the risk of state-based litigation, a legal specialist has advised.
DBA Lawyers special counsel Bryce Figot warned against the practice authorising a deed using electronic means because not all Australian states and territories have implemented laws to allow such a practice.
“NSW introduced a section allowing electronic execution of deeds [and] the Corporations Act has also got a section about electronic execution of deeds for companies. We also got some laws allowing for electronic execution of deeds in Victoria and certain other jurisdictions,” he told attendees of the latest DBA technical webinar hosted on Friday.
“I really want to emphasise not all jurisdictions around Australia allow for electronic execution of deeds, so to what extent can we use electronic execution of deeds?” he asked.
“Let me give you a really good answer. Zero. Why? Because it is too hard to know which jurisdiction to apply,” he answered.
“Do you know with complete certainty in which jurisdiction an SMSF might get litigated? The answer is you do not know that.”
He referred to a Supreme Court case, Booth v Cantor Management Services Pty Ltd (2016), to illustrate the unexpected consequences that may arise when a deed may involve interests in different jurisdictions.
In that case the judge determined the clause stating a deed is governed by the laws of the state or territory where it was executed is ‘non-exclusive,’ allowing the deed to be subject to laws beyond the executing state.
Therefore, despite the deed being initially executed in Queensland, the case was heard in the South Australian Supreme Court as the member passed away in that state.
“How the heck are you going to know where your client’s executor ultimately will be when the client dies? Very difficult to know,” he noted.
“For that reason, I am loathe to conjecture as to what jurisdiction will apply. Can a deed be made electronically in every Australian jurisdiction? South Australia? You cannot. Tasmania? You cannot. Western Australia? You cannot. ACT? You cannot. NSW. You can.
“So I think we’ve got to just do it the old fashioned way. You got to print out the entire document, old school, hard copy, wet signature. When it comes to executing deeds, do it in hard copy.”